How much should I save to grow a £100k ISA pot?

Whether you are saving for retirement, looking at long-term wealth building or have a specific goal in mind for the future, Individual Savings Accounts (ISAs) can be a great tool to help you achieve it.

- KARL MATCHETT

Gains made from money in an ISA – interest earned, dividends or capital gains – are tax free and, under current regulations, each person can save up to £20,000 in an account every single tax year.

What’s more, the earlier you start, the greater your chances of hitting your long-term targets, as time can be the great multiplier when it comes to your money, thanks to the effect of compounding.

Therefore, even if you don’t get anywhere near using up your £20,000 allowance, you can still set yourself lofty targets – such as a milestone figure of reaching £100,000.

There are several types of ISAs available, but here we’ll look at cash and investing ISAs.

Cash ISA

The is the most-used type of ISA. Right now, with the interest rate on cash ISAs somewhere around a competitive 4.5 per cent mark, you can not only earn a reasonable amount on your money but you can also protect it from inflation, which is running at 3.5 per cent and not projected to drop below 3 per cent until next year at least.

However, interest rates fluctuate a lot over time, meaning you may need to regularly check you are earning the best amount on your money. How long it takes to reach £100,000 depends on multiple factors, such as your initial deposit amount, ongoing contributions and your interest rate.